Higher gains for Infra projects ; with limited cost and time over-runs

Projects waiting for completion soon becoming a thing of the past.

Higher gains will follow infrastructure projects as time and cost over-runs are getting limited. In 2000, cost overrun faced by central-sector infrastructure projects was as high as 36 per cent. Also, 45 per cent of the announced/under-implementation projects were facing time overruns in 2000, which peaked again in 2013 (51 per cent); the share of projects facing implementation delays almost halved since then.

According to official data reviewed by FE, a little over a quarter of 1,231 projects valued at Rs 17.31 lakh crore were delayed as of March this year. The original cost of these projects, each valued at Rs 150 crore or above, was Rs 15.6 lakh crore.

Analysis of projects showing substantial time and cost overrun showed that 41 projects having cost overrun of 50 per cent contributed nearly 64 per cent of the total cost overrun.

Of the 1,231 ongoing projects, 322 have cost overruns, with average cost overrun being 82 per cent of original cost. 327 projects were delayed as on March 31, 2017, ranging from 1 to 261 months.

Additionally, 571 projects have been reported with inadequate information about commissioning schedule. Only nine projects were ahead of schedule. The expenditure incurred on all projects till March, 2017 is Rs 7.46 lakh crore, or 43 per cent of the anticipated cost of the projects.

Projects with highest cost overrun include railways (145 per cent), urban development (110 per cent), petrochemicals (82 per cent), atomic energy (71 per cent) and power (56 per cent). Despite massive investments in the highways sector, the cost overruns were slightly better for it (32 per cent). Cost overruns were nil for telecom while it was only 3.5 per cent for coal.

Some of the main reasons of cost escalation including spiralling land acquisition costs, high cost of environmental safeguards and rehabilitation measures, changes in scope of projects, monopolistic pricing by vendors of equipment services and time overrun. Main causes of time overrun are delay in land acquisition and obtaining environment clearances,lack of infrastructure support and linkages and delay in tie-up of project financing.

The recent improvement in project implementation could largely be attributed to the government’s focus on increasing public spending on projects and completion of stalled projects. Half of the 12th Five-Year Plan (2012-13 to 2016-17) investments of Rs 38 lakh crore in 12 specified infrastructure sectors materialised in 2015-16 and 2016-17, the last two years of the Plan period.